A Stock Screener with a Plus

The new BW50/S&P 500 Screener is the only such tool that lets you put BusinessWeek's editors to work for you

By Robert Barker

Any Web site devoted to individual investors that's worth a click offers a tool to sift or "screen" through long lists of stocks according to criteria you choose. You'll find good ones at MSN MoneyCentral and Morningstar.com, for instance, as well as at BusinessWeek Online's own Investing channel.

Now, BusinessWeek Online has added a screener with a difference -- a measure of performance you'll find nowhere else on the Web. It's the BW50/S&P 500 Screener. What makes it so cool is how it permits you to put the judgment of BusinessWeek's editors to work for you whenever you want.

Right at the top of the screener's list of 15 criteria you'll find one labeled "BusinessWeek Rank." That represents BW's evaluation of each company in the Standard & Poor's 500 stock index (S&P, like BusinessWeek, is owned by The McGraw Hill Companies). The lower the number (i.e., closer to No. 1), the better the company has performed. There's no guarantee, naturally, that one of today's corporate stars will turn in a stellar performance in tomorrow's stock market. But you can use the BW Rank to home in on the S&P 500's solid citizens.

With that in mind, I've used our new BW50/S&P 500 Screener to develop four "short lists" of stocks worth your further research. For starters, and with energy stocks so much in the news now, I asked the screener to find energy companies with a BW Rank of 50 or better, but with a price-to-estimated-earnings ratio of no more than 15. Here's the list of hot energy stocks it came up with:

Will energy stocks continue to perform well? I don't know, but if that's your bet, these companies make good candidates to check out further.

Some investors are betting the trend to lower interest rates will help retailers' stocks. So I set the screener to look through retail stocks with BW Ranks no worse than 100 and market capitalizations as low as possible. My theory: These smaller companies, more so than giants like Wal-Mart (WMT ), may have been overlooked. Here's what the screener came up with:

Interested in picking through tech stocks? You're brave, but I'm with you. I've been wondering, are there any Internet stocks whose profit margins have grown in the past year? So I set the screener to search for that and -- I should've known -- found that none fit the bill. How about computer stocks? Bingo -- a list of 12, including the likes of Microsoft and IBM, which I then cut down further by demanding a BW Rank of no worse than 50:

By now, I know you're getting the idea. The screener doesn't produce lists of stocks to run out and buy. But it does, in quick and easy fashion, cut down a list of 500 of Corporate America's biggest companies to a manageable size for an individual investor to research. As always with investment research, you have to use your common sense. When the database spits out the "fact" that Cabletron Systems (CS ) is expected to see its earnings per share grow 631.1% in the coming year, be skeptical. That's a mathematical illusion of the sort it takes a human to recognize and ignore.

While the screener allows you to construct some elaborate filters -- for example, large-cap stocks in the electronics industry with poor trailing-year stock market performance but relatively high estimated future earnings growth, a low price-to-sales ratio, and a top-quintile BW Rank -- simple ones tend to make the most sense. Such as, which of BW's top 50-ranked companies have had the lowest total return to shareholders over the past year? Maybe some of the following will bounce back:

Ideas for winning stocks can germinate anywhere, from knowledge of the industry you work in to scanning newspaper tables of new highs and lows to database searches. BW Online's newest screener is a sharp tool, combining the experience and judgment of BW's editorial staff with the speed of computers and the constant, easy access made possible by the Internet. I call that one powerful combination.

Barker covers personal finance in his Barker Portfolio column for BusinessWeek. His barker.online column appears every Friday, only on BW Online

Questions? Comments? Let us know at our barker.online interactive forum

Edited by Patricia O'Connell